Pricing strategy is like walking a tightrope: price too low and you lose money that is rightfully yours; price too high and you lose business. Without knowing how to bill and what to charge, you risk looking like an amateur to the prospects that you desire most as clients. And it can take years to recover from a poor pricing strategy.
There are three common ways to determine the pricing strategy for an IT service business:
Price-fixed
Per PC or per server basis
By the hour
Price Fixed Pricing Strategy
In order to offer a fixed pricing strategy you need to know the exact scope of what you're doing. You also need very tightly defined parameters so that you don't end up doing work that is beyond the original scope.
Per PC or Per Server Pricing Strategy
This type of pricing strategy is pretty much the same as price-fixed, except you need to have a handle on unit costs. You need to know whats going to change as you add or remove a PC or add or remove a server, and how it scales up the project. A per PC or server pricing strategy does give you more flexibility if the scope of the project starts to include more boxes. Some IT service businesses choose to combine the price fixed and the per PC or server pricing strategies.
By the Hour Pricing Strategy
Another name for this pricing strategy is "time and materials" pricing. This is the most commonly used pricing strategy in the IT service industry. You set an hourly rate and you may choose to add a markup on the materials you provide. This is the most flexible pricing strategy and the one where you are most protected when the scope of the project goes beyond your original estimate.
Bottom Line on Pricing Strategy
There are three main categories of pricing strategy. Before deciding on the best pricing strategy for you and your business, you should consider the pros and cons of each. The way you price your services has a significant effect on your business' profitability and longevity - take your pricing strategy seriously, right from the start.
Copyright MMI-MMVII, Computer Consulting 101 Blog. All Worldwide Rights Reserved. {Attention Publishers: Live hyperlink in author resource box required for copyright compliance} |
